Introduction: This article focuses primarily on the historical background and causes of the debt crisis in the late 1970s and 1980s. Debt crisis was known as financial crisis and defined as a point of concern of a country. The accumulation of external debt exceeds its earning capacity and the country does not have the capacity to repay the debt. The debt crisis was easily identified by Mexico's inability to meet its outstanding debt of $80 billion. And the situation continued to get worse, and a year later, by October 1983, 27 countries owing $239 billion had rescheduled their debts or were in the process of doing so. The total debt areas were major in developing countries or known as third world. groups: Latin America, East Asia and sub-Saharan Africa. East Asian countries, including South Korea and Thailand, were not involved in the debt crisis and did not repay their debt later. On the other hand, Latin American countries are the group most affected by the debt crisis, since 16 of the 27 countries are from Latin America, and the four largest - Mexico, Brazil, Venezuela and Argentina - owe commercial banks $176 billion, or about 74% of the debt. the total outstanding debt of the least developed countries. And the crisis is often known as the “lost decade.” This essay would mainly focus on why Latin America is involved in the debt crisis. Overview: According to the traditional view, the main causes of the debt crisis were divided into two main parts: External Factors include oil shocks, floating interest rates and capital flows. Internal factors include ineffective use of government policies, including borrowing policy and trade policy. However, Susan George made another point that explored the interlocking network of national banks, third world elites and.... ... middle of paper ...... changes in market interest rates . Borrowers bear the risk of an increase in interest rates. However, with the low interest rates of the 1970s, the problem was neglected (Pollin, 1989 and George, 1988). Available at: http://www.fdic.gov/bank/historical/history/191_210.pdf [Accessed 1 May 2010]. George, S. (1988), A Fate Worse Than Debt, Penguin Books, London. Pollin, R. (1989), A Fate Worse Than Debt: The Global Financial Crisis and the Poor. Available at: Monthly Review Foundation, website: http://www.tni.org/inthemedia/fate-worse-debt-world-financial-crisis-and-poor [Accessed: June 6, 2010].Cuddington, JT (1989 ), “The scale and causes of the debt crisis in the 1980s”. In Diwan, I. Facing the Debt Crisis, World Bank Publications